Friedman Facts.com

Is the current economic crisis part of Milton Friedman’s legacy?  Yes, according to Senator Bernard Sanders who will argue the case tonight at the University of Chicago.  Sanders, a self-described socialist who, according to Howard Dean, “votes with the Democrats 98 percent of the time,” can hardly be considered an unbiased judge.*

Although his thesis appeals to some scholars and media outlets, it is as false as any claim can be.  To say that we have been living in a laissez-faire system, as Sanders claims, is to ignore everything relevant about our current regulatory system.  Today Cato Unbound published economics professor Lawrence H. White’s discussion of “What really happened.” An excerpt:

The actual causes of our financial troubles were unusual monetary policy moves and novel federal regulatory interventions. Regulatory distortions intensified in the 1990s. Poorly chosen public policies distorted interest rates and asset prices, diverted loanable funds into the wrong investments, and twisted normally robust financial institutions into unsustainable positions.

We can group most of the unfortunate policies under two main headings: (1) Federal Reserve credit expansion that provided the means for unsustainable mortgage financing, and (2) mandates and subsidies to write riskier mortgages. The enumeration of regrettable policies here is by no means exhaustive.

Professor White’s article is a summary of a more thorough briefing paper on the economic crisis, which we encourage everyone to read before believing Sanders’ bilge wholesale.

*It should also be noted that Sanders holds a BS in a non-economic field and does not hold a higher degree in that area (or any other area).